SV AGRI TRADE LLP ,MUMBAI vs. DY CIT-CENTRAL CIRCLE 1(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 2959/MUM/2023 (Assessment Year: 2016-17) SV Agri Trade LLP, D/16, Saujanya, Veer Savarkar Marg, Bhandup, Mumbai - 400042 [PAN: ACEFS2593Q] …………… Appellant Vs Deputy Commissioner of Income Tax, Central Circle 1(1), Mumbai, Respondent ……………. Pratishtha Bhavan, Mumbai - 400020 Appearance For the Appellant/Assessee : Shri Amar Gahlot Shri Nalin Bajaj Ms. Ashwarya Pawar For the Respondent/Department : Dr. Kishor Dhule Date Conclusion of hearing : 21.06.2023 Pronouncement of order : 27.07.2023

O R D E R Per Rahul Chaudhary, Judicial Member: By way of the present appeal the Appellant has challenged the order, 1. dated 22/09/2022, passed by the Ld. Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2016-17, whereby the Ld. CIT(A) had partly allowed the appeal of the Appellant against the Assessment Order, dated 26/03/2019, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

The Appellant has raised following grounds of appeal: 2.

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) “1. That, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 1,79,179/- made by the Ld. AO to the assessee's income on account of undervaluation of closing stock when the shortage was clearly reported in Form 3CD uploaded on the income-tax website.

The relevant facts in brief are that the Appellant is a Limited Liability 3. Partnership (LLP) engaged, inter alia, in the business of trading in agricultural commodities.

3.1. A survey action was conducted at the premises of the Appellant under Section 133A of the Act on 21/04/2016 by the Investigation

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) Wing of the Income-tax Department, New Delhi and the books of accounts, bank statements, documents and the back-up of the server & personal computers of the Appellant were impounded. Statement of Mr. Rajendra Yeralkar, partner of the Appellant-LLP, was recorded.

3.2. The Appellant filed its return of income for the Assessment Year 2016-17 on 16/10/2016 declaring total income of INR 4,80,76,571/- after claiming set off of brought forward losses of INR 5,04,23,739/-. The return was processed under Section 143(1) of the Act. Subsequently, the case of the Appellant was selected for limited scrutiny which was converted to complete scrutiny after taking approval from the Principal Commissioner of Income Tax- Central-I, Mumbai, vide letter dated 13/03/2018.

3.3. During the assessment proceedings, the Assessing Officer took note of the survey proceedings and on account of multiple issues relating to the entities associated with the Appellant, directed the Appellant to get his accounts audited from the special auditor and furnished audit report under Section 142(2A) of the Act. The Appellant complied with the aforesaid directions and filed the audit report, dated 13/10/2018, with the Assessing Officer. After taking into consideration the aforesaid audit report by the special auditor, the Assessing Officer completed the assessment vide Assessment Order, dated 26/03/2019, passed under Section 143(3) of the Act assessing the total income of the Appellant at INR 18,36,24,458/- after making, inter alia, the following addition and disallowances:

Particulars of income Amount (INR) 1. Undervaluation of closing stock of Toor 1,79,179 2. Suppression of income 3,85,39,757

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) 3. Understatement of Income 1,16,61,454 4. Disallowance under Section 40(b) 6,87,736 5. Addition of Profits on Toor Dal Transaction 3,55,50,423

3.4. Being aggrieved, the Appellant preferred appeal before the CIT(A) against the Assessment Order, dated 26/03/2019 challenging, inter alia, the above additions/disallowances. However, the CIT(A), vide order, dated 22/09/2022, decided the appeal without granting any relief to the Appellant on the aforesaid additions/disallowances.

3.5. Therefore, the Appellant has preferred the present appeal before the Tribunal against the order, dated 22/09/2022, passed by the CIT(A) on the ground reproduced in paragraph 2 above which are taken hereinafter.

Ground No. 1 4.

4.1 Ground No. 1 pertains to addition of INR 1,79,179/- made by the Assessing Officer on account of under valuation of closing stock of Toor Dal.

4.2 During the assessment proceedings, the Assessing Officer noted that as per Annexure – I of the special audit report under Section 142(2A) of the Act the closing stock of Tanzania Origin Toor Dal has been shown at 3.35 MT, while as per Clause 35a of the tax audit report under Section 44AB of the Act, the same has been shown as 'NIL’. Therefore, the Appellant was asked to explain why the value of difference of closing stock Tanzania Origin Toor Dal should not be brought to tax. In response the Appellant filed reply letter, dated 27.11.2018, and in point no. 15 of the Appellant submitted as under:

“Annexure-I of Audit Report u/s 142(2A) of the Income Tax Act, 1961 closing stock of Tanzania Toor is wrongly shown as 3.35 MT. Opening

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) Stock of Tanzania Toor is 722.98 MT and there is sale of 719.63 MT where as 3.35 MT has been found short which is also shown both in Tax Audit Report as well as Special Audit Report. 3.35 MT figure in Closing Stock column is erroneously entered in Form CD. Therefore, there is no closing stock of Tanzania Toor as on 31-03-2016 and learned assessing officer is requested to not make any addition on this ground.” 4.3 According to the Assessing Officer, the Appellant-firm was equipped with the well qualified accountants and guided by chartered accountants and therefore, the explanation offered by the Appellant that there was an inadvertent error was rejected by the Assessing Officer as being not acceptable. Taking value of toor dal INR 71,510/- per MT, and closing stock as 8.856 MT, the Assessing Officer calculated the value of the closing stock of Toor Dal to be INR 6,33,293/- as against INR 4,54,114/- adopted by the Appellant. Thus, the Assessing Officer arrived at difference of INR 1,79,179/- in the value of closing stock and made addition of the same amount on account of undervaluation of the closing stock.

4.4 Before CIT(A) the Appellant contended that there was no closing stock of Tanzania Origin Toor Dal and made following submission (as contained in paragraph 4 of the order impugned): “4. Ground-2 Undervaluation of Closing Stock of Toor Rs. 1,79,179/- Submissions regarding Undervaluation of Closing Stock: i. The appellant had Opening Stock of Tanzania Toor of 722.98 MT and during the appellant sold 719.63 MT & there was a shortage of 3.35 MT. The Sale of Tanzania Toor is shown separately with TOT abbreviation. This fact was clearly shown in Tax Audit Report - Form 3CD in Serial No. 35a.3 The Sales Invoices are marked as Annexure-8 ii. In the submissions before learned A.O. the closing stock quantity was wrongly shown at 8.856 which included shortage of 3.35 MT. However the Value of Rs. 4,54,114/- was a correct value.

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17)

iii. The appellant submits that entire purchase of Toor during the year was of Myanmar Lemon Toor and entire closing stock was of same variety. iv. There was no closing stock of Tanzania Toor. The opening stock of Tanzania Toor was sold and there was shortage of 3.35 MT as explained above.” 4.5 However, the CIT(A), not being convinced, confirmed the addition of INR 1,79,179/- made by the Assessing Officer. The Appellant is now in appeal before the Tribunal on this issue.

4.6 The Ld. Authorised Representative for the Appellant appearing before us reiterated the submissions made before the authorities below. He vehemently contended that the only reason for the addition was the advertent totaling error regarding the closing stock of Toor Dal made in the manually prepared Annexure 12 to Form 3CD (placed at page 119 of the paper-book) which was corrected in the e-copy of the Form 3CD filed online (placed at page 116 of the paper-book). The actual closing stock was 5.51 MT, but erroneously in the Annexure 12 of the manual Form 3CD it was incorrectly totaled as 8.86 MT, wherein the shortage of 3.35 MT was not subtracted (though it was reported). The online Form 3CD showed the accurate closing stock.

4.7 Per contra, the Ld. Departmental Representative relied upon the order passed by the Assessing Officer and CIT(A) on this issue. He submitted that the Appellant had failed to establish the correct quantity of closing stock of toor dal in the assessment proceedings.

4.8 We have perused the material on record and considered the rival submissions. On perusal of Annexure 12 to Form 3CD, physically filed copy (placed at page 119 of the paper-book), following position emerges.

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) Particulars Stock Position as per the manual From 3CD (MT) Opening Stock 2232.95 Add : Purchase 240.66 Less : Sales 2464.75 Total 8.86 Less : Shortage 3.35 Closing Stock 8.86

4.9 We find that closing stock has been incorrectly calculated at 8.86 MT instead of 5.51 MT in the physical/manual Form 3CD even though the shortage of INR 3.35 has been disclosed. The calculation error has resulted in a difference of 3.35 metric ton. The Assessing Officer had taken the closing balance as 8.856 MT and therefore, arrived at value of closing stock of INR 6,33,293/- as against INR 4,54,114/- adopted by the Appellant. We note that even before the CIT(A), it was submitted by the Appellant that the closing stock of toor dal consisted of Myanmar Lemon Toor Dal only and on sale of Tanzania Toor Dal the Appellant got to know of shortage of 3.35 MT which was reduced to arrive at the figure of closing stock to arrive at the correct closing stock valuation of INR 4,54,114/-. Accordingly, accepting the contention of the Appellant that there was no undervaluation of closing stock we delete the addition of INR 1,79,179/- made by the Assessing Officer. Accordingly, Ground No. 1 raised by the Appellant is allowed.

Ground No. 2 5.

5.1 Ground No. 2 is directed against the order of the CIT(A) confirming the addition of INR 3,32,58,600/- out of the addition of INR 3,85,39,757/- made by the Assessing Officer on account of suppression of income.

5.2 During the course of assessment proceedings, the Assessing Officer

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) noted that the Sauda Settlement Income as shown in the audited books of accounts of the Appellant was less than Sauda Income shown in the impounded books of account by INR 3,32,58,600/-. The Appellant was asked to explain the reason for the variation. In response, the Appellant filed submissions on 15/02/2019. However, the same did not contain any submissions in relation to the above query raised by the Assessing Officer. The Assessing Officer, therefore, concluded that the Appellant had no plausible submissions to offer and made an addition of INR 3,32,58,600/- on account of undisclosed Sauda Income.

5.3 Being aggrieved, the Appellant preferred appeal before CIT(A) and filed additional evidences in the form of ledger confirmations from some of the parties and explained the reason for variation. The CIT(A) called for a remand report from the Assessing Officer on the additional evidence furnished by the Appellant. In response, the Assessing Officer filed a remand report objecting to the admission of additional evidence and supporting the addition of INR 3,32,58,600/- made by his predecessor while framing the assessment on the Appellant. The CIT(A) also granted an opportunity to the Appellant to file response to the remand report. In rejoinder, the Appellant made the following submissions (as recorded by the CIT(A) in paragraph 10.5 of the order impugned):

“10.5 At appellate stage, the appellant in response to remand report filed its rejoinder, objecting assertion of the AO and requested to delete all the additions made by AO. The rejoinder of the appellant is reprod’uced as under for the sake of clarity: a) Reduction in Sauda Settlement Income partywise break up is as under Para 5.5.3(a) Pages 5,6,7 of Remand Report: Agricore Commodities Private Limited Rs. 1,56,20,000/- The learned A.O. has observed that difference is on account of

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) Credit Note of Rs. 1,68,25,000/-dated 31.03.2016 and Debit Note of Rs. 12,05,000/-/. Submissions: The ledger account of Agricore Commodities Private Limited was available before learned A.O. and Special Auditor who have examined the same. Thus these entries were before A.O. when he passed the order. Further there was search on Agricore Commodities Private Limited and their Accounts were before A.O. at the time of passing of assessment order. The accounts of the appellant and Agricore Commodities Private Limited have been reconciled completely as is evident from ledger confirmation vide Page Nos 424 to 427 of letter dated 24.06.2019. Hence with reduction in income of the appellant company of Agricore Commodities Private Limited. Thus from overall perspective this transaction is tax neutral. The learned A.O. has also accepted the difference after calling for confirmation from Agricore Commodities Private Limited u/s 133(6). Amit Commercial Rs. 28,79,000/- The learned A.O has confirmed that there is net debit note of Rs, 58,34,340/- instead of Rs. 87,13,340/- thereby confirming the difference of Rs. 28,79,000/-. Submissions: The accounts of the appellant and Amit Commercial have been reconciled completely as is evident from ledger confirmation vide Page Nos 428 to 430 of letter dated 24.06.2019. Hence with reduction in income of the appellant company there is corresponding reduction in expenditure or increase in income of Amit Commercial. Thus from overall perspective this transaction is tax neutral. The learned A.O. has also accepted the difference after calling for confirmation from Agricore Commodities Private Limited u/s 133(6). Atul Mulji Rs. 61,35,400/-. The learned A.O has confirmed that no credit note was issued to the party. The party was mere involved in transactions as broker. Submission: As explained earlier, the appellant followed practice of preparing excel sheet for review purpose on estimate basis. The question of passing any debit note or credit note at that time does not arise. Hence merely on the basis of such excel sheet, income does not accrue to the appellant. Thus question of passing entry in the books of account does not arise at all. The learned A.O has confirmed that with this reduction in income, the opposite party has not recorded any

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) expense at all. The accounts of the appellant and Atul Mulji have been reconciled completely as is evident from ledger confirmation vide Page No 431 of letter dated 24.06.2019 Thus on overall perspective, this transaction is tax neutral. Murlidhar Ratanshi Rs. 33,25,500/- The learned A.O. has confirmed that ledger account of Murlidhar Ratanshi shows transaction of Rs. 81,554/- during financial year 2015-16. There is no credit note showing any sauda between appellant and Murlidhar Ratanshi Submissions: As explained earlier, the appellant followed practice of preparing excel sheet for review purpose on estimate basis. The question of passing any debit note or credit note at that time does not arise. Hence merely on the basis of excel sheet, income does not accrue to the appellant. Thus question of passing entry in the books of account does not arise at all. The learned A.O has confirmed that with this reduction in income the opposite party has not recorded any expense at all. Thus on overall perspective, this transaction is tax neutral Sunil Kumar Shamji Rs. 50,11,000/- The learned A.O has confirmed that as per party, no sauda was done with the appellant during financial year 2015-16. Submissions: As explained earlier, the appellant followed practice of preparing excel sheet for review purpose on estimate basis. The question of passing any debit note or credit note at that time does not arise. Hence merely on the basis of excel sheet, income does not accrue to the appellant. Thus question of passing entry in the books of account does not arise at all. The learned A.O has confirmed that with this reduction in income the opposite party has not recorded any expense at all. Thus on overall perspective, this transaction is tax neutral GP Enterprises Rs. 2,87,700/- The learned A.O. has stated that no reply was received from the party Submissions: The reasoning mentioned above will apply to the facts of this case equally. Merely because party has not confirmed transaction with the appellant does not mean any income has accrued to the appellant only on the basis excel sheet which is prepared for review purpose. Further learned A.O on Page-7 first para has stated that data

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) was available during course of assessment proceedings and assessee was not prevented from submitting the same. Submission: it is not disputed that ledger account of the parties was in Tally records of the appellant and the same were examined by the Special Auditor who have confirmed this factual position. The ledger accounts were available before A.O. also. Only confirmations in support of genuineness of transactions with the parties were produced subsequently. This is as per decision of Jurisdictional High Court in Smt Prabhavati Shah case mentioned above. These records are in continuation of accounting records as mentioned in Poddar Swadesh Udyog case. Learned A.O has stated that parties have denied having done any transaction with the assessee and the amounts reflected in the parties differ substantially. It appears that it is an after thought to explain the difference between impounded data and the final books prepared. Submissions: When any party has not done transaction with the appellant, question of taxing income in the hands of the appellant does not arise. The learned A.O has made unsubstantiated statement of difference in balances without specifying the exact amounts partywise. The learned A.O if he was of the opinion that the entries passed in the books and examined by Tax Auditor and Special Auditor are afterthought, he should have rejected books of account which he has not done. This shows that statement of the learned A.O is full of conjunctures and surmises b) Increase in Purchases Rs. 4,94,391/- Para 5.5.3(b) Page-7 of Remand Report The learned A.O. has accepted that an amount of Rs. 4,94,390/- is included in the ledger account of Northern Foods Marketing Private Limited. Submissions: xx xx c) Increase in Administrative Expenses Rs. 41,19,887/- para 5.5.3(c) page- 7 of remand Report. The learned A.O. has accepted increase in Audit Fee of Rs. 3,45,000/- and write off bad debts of Rs. 24,89,678/- from R. B. M Mills. Submissions: xx xx d) Increase in Exchange Trading Expenses Rs. 6,66,879/- Para 5.5.3(d) Page-7 of Remand Report. The learned A.O. has

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) accepted these expenses as shown in audited books of account. Thus on one hand he has accepted contention of the appellant in respect of paras b, c, d above and on other hand he rejects contention in respect of para a without rejecting books of account which are audited by Tax Auditor and Special Auditor. On one hand, having regard to the nature and complexity of accounts, the learned A.O directed appellant to carry out Special Audit, then in such an eventuality if supporting evidence in continuation of accounts any evidence is brought on record, the same should have been also accepted. …..” 5.4 However, the CIT(A) was not convinced with the explanation/submissions offered by the Appellant and concluded that the transactions undertaken by the Appellant cannot be treated as having been substantiated. Therefore, the CIT(A) confirmed the addition of INR 3,32,58,600/- made by the Assessing Officer.

5.5 Being aggrieved, the Appellant carried the issue in appeal before us.

5.6 We have considered the rival submission and perused the material on record. We note that the addition of INR 3,32,58,600/- made by the Assessing Officer on account of difference in Sauda Settlement Income consisted of the following: Name of the Party As per Excel As per Audited Difference Sheet Tally Agricore commodities Pvt. Ltd. 7,55,01,550 5,98,81,550 1,56,20,000 Amit Commercial 87,13,340 58,34,340 28,79,000 Atul Mulji 61,35,400 61,35,400 61,35,400 Broker Murlidhar Ratanshi 33,25,500 - 32,25,000 Sunil Kumar Shamji 50,11,000 - 51,11,000 GP Enterprises - -2,87,700 2,87,000 Total 3,32,58,600

5.7 On perusal of above, it can be seen that the variations pertain to transaction undertaken by the Appellant with six parties. The Assessing Officer made the addition of INR 3,32,58,600/- as no details/submission were filed by the Appellant. However, in appeal before the CIT(A), the Appellant made submissions and filed

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) additional evidence. The CIT(A) called for a remand report which was submitted by the Assessing Officer. The Assessing Officer issued notice under Section 133(6) of the Act to all the six parties and in remand report, provided his comments on variations pertaining to each of the six parties which have been reproduced in paragraph 5.5.3 of the order impugned. However, the CIT(A) confirmed the addition of INR 3,32,58,600/- without specifically dealing with the submissions of the Appellant and the comments received from the Assessing Officer in the remand report in the following manner.

“10.6 I feel on the issue of sauda settlement account, the appellant has already got relief while deciding the earlier ground. Also, the appellant has made bald statement instead of proving the genuineness of transaction. Furthermore, some of the parties have denied to have done any transactions with the assessee and the amounts reflected in the confirmations of the parties differ substantially. So, it cannot be held as proved. The clarification done in some parities is not convincing since, the doubts remained unsolved for other parties. Overall, the transactions cannot be treated as substantiated. Besides, the appellant itself submitted that the correct amount of Rs. 3.69,32,984/- was included in addition on account of Rs. 3.85,39,757/- Suppression of Income and therefore requested to delete this double addition It shows that the appellant is agreed with the said addition. Hence, no further relief can be granted as this issue has already decided in favour of the appellant. Accordingly, an addition of Rs.3,32,58,600/- is sustained.” 5.8 On perusal of the above, we find merit the contentions advanced on behalf of the Appellant that the CIT(A) has not specifically dealt with the submission and evidence filed by the Appellant in relation to each of the six parties and as well as the replies received from the six parties in response to notices issued by the Assessing Officer under Section 133(6) of the Act. In view of the aforesaid, we restore this issue back to the file of CIT(A) for fresh adjudication. All rights and contentions of the parties are left open. Ground No. 2 raised by the Appellant is allowed for statistical purposes. 13

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17)

Ground No. 3 6.

6.1 Ground No. 3 is directed against the order of CIT(A) remanded back the issue relating to exceed income of INR 1,61,61,454/- to the Assessing Officer.

6.2 During the course of assessment proceedings, the Assessing Officer noted that the special auditor had highlighted the variance between profits as per the tally data furnished by the Appellant for the purpose of special audit and the tally data back-up impounded on the date of survey. The profits as per impounded tally back up exceeded the tally back-up for audit furnished by the Appellant by INR 1,61,61,454/-. The Appellant was asked to explain the aforesaid variance during the course of assessment proceedings. In response, the Appellant filed reply dated 08/10/2018 submitting that the tally data was impounded on 21/04/2016 just 21 days after the end of the relevant financial year and therefore, on that day the account for the relevant previous year was not finalized. Thus, there was bound to be difference between tally back-up impounded and the tally data furnished to the special auditor by the Appellant. Thereafter, vide notice dated 05/02/2019, the Appellant was asked to again provide explanation and in response thereto, the Appellant reiterated the earlier submission vide letter, dated 07/03/2019. Rejecting the explanation offered by the Appellant, the Assessing Officer made an addition of INR 1,61,61,454/- on account of understatement of income relying upon the report of the special auditor.

6.3 The Appellant carried the issue in appeal before CIT(A). It was contended on behalf of the Appellant that the Appellant had requested the Assessing Officer to provide copy of the tally back-up

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) impounded so that the Appellant could reconcile the tally data impounded with the tally data furnished to the statutory auditor by the Appellant. The Appellant reiterated the same contention before the CIT(A) and therefore, the CIT(A) remanded the issue back to the file of Assessing Officer with the direction to the Assessing Officer to provide copy of the tally back-up impounded to the Appellant and granted the Appellant opportunity to reconcile the same with the audit books of accounts. The CIT(A) further directed the Assessing Officer to delete the addition made by the Assessing Officer to the extent the Appellant was able to reconcile the data.

6.4 The Appellant is now in appeal before the Tribunal contended that the remand of the issue to the file of the Assessing Officer by the CIT(A) was in contravention of the provisions of Section 251(1)(a) of the Act. We find merit in the aforesaid contention advance on behalf of the Appellant. The power given to the CIT(A) in terms of section 251(1)(a) of the Act relates to confirming, reducing, enhancing or annulling the assessment. Considering the facts and circumstances of the present case, we set aside the order passed by the CIT(A) on this issue with the directions to adjudicate on the same on merits in accordance with provisions of Section 251(1)(a) of the Act and the provisions contained in Rule 46A of the Income Tax Rules, 1962. In terms of the aforesaid, Ground No. 3 raised by the Appellant is allowed.

Ground No. 4 7.

7.1 Ground No. 4 pertains to disallowance of INR 6,87,736/- under Section 40(b) of the Act sustained by the CIT(A).

7.2 Vide query No. 15 raised by the Assessing Officer through notice

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) dated 05/02/2019 issued under Section 142(1) of the Act, the Appellant was asked to substantiate the claim of deduction of INR 6,78,736/- actual supervision charges paid by the Appellant to SV Logistics, proprietary concern of one of the partners of the Appellant- LLP. The query raised upon the Appellant read as under:

“15. On perusal of the details furnished by you vide point no.17 of letter dated 27.11.2018 you have mentioned that supervision charges of Rs.6.87.736/- have been paid to SV Logistics, Proprietary Concern of Mr.Rajendra Yeralkar, who is a Partner of the Assessee Firm. In this context, as per Clause 12 of the Partnership Deed of SV Agri Trade LLP only Mrs. Pradnya Sandeep Jadhav is entitled for remuneration. Therefore, such unauthorised payment of remuneration in the form of supervision charges is not allowable as deduction us 40(b) of the Income Tax Act, 1961.”

7.3 In response, the Appellant filed reply letter dated 07/03/2019 wherein in paragraph No. 19 it was stated as under: “Proprietary concern SV Logistics of Mr. Rajendra Yeralkar was rendering Supervision Services to the assessee entity for which S V Logistics has charged supervision charges. These charges are out of the purview of Sec. 40(b) of the Income Tax Act, 1961 and allowed as normal business expenses.” 7.4 However, the Assessing Officer was not satisfied with the explanation furnished by the Appellant made a disallowance of INR 6,87,736/- by invoking provisions of Section 40(b) of the Act observing that the aforesaid payment made to the partner of the Appellant-LLP was not in the mentioned in the partnership agreement and therefore, the Appellant was not entitled to claim deduction for the same.

7.5 Being aggrieved, the Appellant carried the issue in appeal before CIT(A) and filed Profit & Loss Account, and Balance Sheet of SV Logistics as additional evidence which were forwarded by the CIT(A) to the Assessing Officer for remand report. In response, the

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) Assessing Officer furnished the remand report contending that the tax audit report filed by the Appellant for the relevant previous year did not disclose any such payment of supervision charges having been made to the related parties under Section 40A(2)(b) of the Act. According to the Assessing Officer, the payments made to SV Logistics were being camouflaged as payments for service rendered. Therefore, the Assessing Officer submitted that the supervision charges of INR 6,87,736/- paid by the Appellant to SV Logistics were not allowable as business expenditure. Relying upon the aforesaid remand report, the CIT(A) confirmed the disallowance made by the Assessing Officer observing that the Appellant had failed to prove the type of services provided by M/s SV Logistics to the Appellant and the fact that the Appellant had deducted tax at source from payments made to M/s SV Logistics cannot be considered as sufficient evidence to prove the genuineness of the transactions.

7.6 Being aggrieved, the Appellant has preferred appeal before the Tribunal on this issue.

7.7 We have heard the rival submissions and perused the material on record. We find that Mr. Rajendra Yeralkar, one of the partners of the Appellant-LLP, is the proprietor of M/s SV Logistics. The contention of the Appellant that M/s SV Logistics had rendered supervisory services not only to the Appellant but to various other customers has not been controverted by the authorities below. Similarly, the contention of the Appellant that M/s SV Logistics had employed fixed assets and other infrastructure, maintained staff and other establishment has also gone uncontroverted. Both the Assessing Officer and CIT(A) have based their decision on the fact that the payment of supervisory charges have not been mentioned in the partnership agreement. In our view, M/s SV Logistics charged

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) remuneration for supervisory services rendered and in absence of any material on record, the same cannot, in our view, be equated with the remuneration paid to Mr. Rajendra Yeralkar in his capacity of a partner from the Appellant-LLP. While making the payment the Appellant had deducted tax at source and therefore, the fact that tax audit report does not disclose payment of supervisory charges to related parties under Section 40A(2)(b) of the Act cannot be the sole basis of denying deduction. The supervisory charges of INR 6,87,736/- paid by the Appellant do not fall within the purview of Section 40(b) of the Act since the same have been paid by the Appellant for the services rendered and not on account of Mr. Rajendra Yeralkar being a partner of the Appellant-LLP. Accordingly, the disallowance of INR 6,87,736/- made by the Assessing Officer, which was confirmed by the CIT(A), is deleted. Ground No. 4 raised in the appeal is allowed.

8 Ground No. 5

8.1 Ground No. 5 relates to addition of INR 3,55,50,423/- made by the Assessing Officer in relation to undisclosed profit from Toor Dal transaction.

8.2 While framing the assessment, the Assessing Officer made an addition of INR 3,55,50,423/- holding the same to be undisclosed profits from Toor Dal transactions. In appeal, the CIT(A) confirmed the aforesaid addition.

8.3 During the course of hearing, both sides agreed that the basis of the addition under consideration was excel file ‘TOOR 2015 SALES.xls’ impounded during the survey proceedings under Section 133A of the Act conducted by the Investigation Wing, New Delhi at business

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) premises of Glencore Grain India Pvt. Ltd. The aforesaid excel file contained transaction with the name ‘Agritrade’. The contention of the Appellant is that the name ‘Agritrade’ mentioned in the impounded excel sheet means ‘Agritrade India Services Pvt. Ltd. and not SV Agritrade LLP, whereas the addition has been made/confirmed on the basis of the understanding that the name ‘Agritrade’ mentioned in the excel sheets represent SV Agritrade LLP which is the Appellant before us.

8.4 We note that during the appellate proceedings before the CIT(A), the Appellant furnished additional evidence being (a) Letter, dated 06.05.2019 from Glencore Agriculture India Private Limited, and (b) another Letter, dated 15.07.2019, from M/s Glencore Agriculture India Private Limited along with confirmation from M/s Agrocorp India Trade Services Private Limited (formerly known as Agritrade India Services Private Limited) for their transactions in F.Y. 2014-15 and Financial Year 2015-16. The CIT(A) forwarded the additional evidence to the Assessing Officer for his comments. On receipt of additional evidence from the CIT(A), the Assessing Officer issued notices under Section 133(6) of the Act to Glencore Agriculture India Private Limited as well as M/s Agritrade India Services Private Limited (for Short ‘AISPL’) to verify the submissions made by the Appellant. In reply Vitrra India Private Limited (formerly known as Glencore Agriculture India Private Limited), filed letter confirming that 'Agritrade' mentioned in the excel file impounded referred to AISPL (now known as Agrocorp India Trade Services Private Limited) and not the Appellant. The PAN No. and address of AISPL was also mentioned in the aforesaid letter. Further, the aforesaid letter was also accompanied by a confirmation letter dated 02/04/2019 issued by AISPL. Vide letter dated 26/07/2021, AISPL (now known as

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) Agrocorp India Trade Services Private Limited) acting through its chartered accountant, also confirmed that the aforesaid confirmation letter dated 01/04/2019 was issued by it through it stated that the transactions mentioned therein were undertaken by the AISPL with some other party. The Assessing Officer noticed that the data of Toor Dal transaction in case of AISPL for the Financial Year 2014-15 matched with the impounded data. However, since most of the entries for Financial Year 2015-16 did not match in respect of rate as well as quantity, the Assessing Officer opposed the acceptance of the contention raise by the Appellant that the data in excel sheet ‘Toor 2015 SALES.xls’ pertained to AISPL. Based upon the remand report received from the Assessing Officer, the CIT(A) rejected the contention of the Appellant and confirmed the addition made by the Assessing Officer observing that the Appellant had failed to place before the CIT(A) any credible evidence in support of the Appellant's contention that the said data in the excel sheet ‘Toor 2015 Sales.xls’ pertains to AISPL.

8.5 During the appellate proceedings before us, the Learned Authorised Representative for Appellant reiterated the stand taken before authorities below and relied upon the letters/confirmations filed before the CIT(A) to show that Glencore Agriculture India Private Limited had confirmed that 'agri'/’agritrade’ mentioned in the excel sheet impounded referred to AISPL and not the Appellant. On the other hand, the Ld. Departmental Representative submitted that specific information was received that the Appellant was involved in hoarding leading to the rise for the price of Toor Dal. Discrepancies were in the books of accounts and therefore, special audit was ordered. The Special Auditor gave report highlighting various discrepancies on the basis of which addition (including the addition

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) under consideration) was made by the Assessing Officer. The Appellant had not challenged the special audit report which had taken into accounts three sets of data pertaining to the Appellant – first, data impounded, second, audited accounts of the Appellant and third, supporting documents. Learned Departmental Representative submitted that when viewed in the aforesaid background, it cannot be said that the Assessing Officer was not justified in making the additions of INR 3,55,50,423/- being undisclosed profits from Toor Dal transactions on the basis of the excel file ‘TOOR 2015 SALES.xls’ impounded during the survey proceedings containing transaction with the name ‘Agritrade’.

8.6 We have considered the rival submissions and on perusal of record. The excel file ‘TOOR 2015 SALES.xls’, on the basis of which additions were made, was impounded during survey at the premises of Glencore Agriculture India Private Limited. The Appellant had filed additional evidence before CIT(A) being letters dated 06/05/2019 (placed at page No. 137 of the paper-book) and 15/07/2019 (placed at page No. 98 of the paper-book) issued by the Glencore Agriculture India Private Limited to the effect that ‘Agritrade’/ágri’ mentioned in the aforesaid excel file meant AISPL. In response to notice issued under Section 133(6) of the Act by the Assessing Officer to verify the aforesaid additional evidence, Glencore Agriculture India Private Limited supported the stand taken by the Appellant. The Assessing Officer on verification found that the transactions pertaining to Financial Year 2014-15 mentioned in the excel file tallied with transactions between the Glencore Agriculture India Private Limited and AISPL. In our view, the aforesaid clearly tilted the balance in favour of the Appellant shifting the onus on the Revenue to bring on record material to establish link between the transactions recorded in

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) excel file with the Appellant. However, in our view, the Revenue failed to discharge the onus. There is nothing on record to corroborate the finding returned by the Assessing Officer that the ‘Agritrade’ mentioned in the aforesaid excel file meant the Appellant. On the other hand, the stand taken by the Appellant get support from the facts the figures provided by AISPL for the financial year 2014-15 matched with the impounded data. In view of the aforesaid, we overturn the decision of the CIT(A) and delete the addition of INR 3,55,50,423/- made by the Assessing Officer. Ground No. 5 raised by the Appellant is allowed.

9 Ground No. 6

9.1 Ground No. 6 pertains to levy and computation of interest under Section 234B & 234C of the Act and the same is disposed off as being consequential in nature.

10 In result, the present appeal preferred by the Assessee is partly allowed.

Order pronounced on 27.07.2023.

Sd/- Sd/- (B.R. Baskaran) (Rahul Chaudhary) Accountant Member Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 27.07.2023 Alindra, PS

ITA No. 2959/Mum/2023 (Assessment Year: 2016-17) आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपील र्थी / The Appellant 1. 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.

आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai